Tuesday, June 15, 2010

If I File For Social Security Disability Will They Offset My Pension?

The answer to this question is not a simple yes or no. It depends upon the type of pension the disability applicant is receiving. Most pensions do not offset an individual’s Social Security disability benefits. Individuals who are receiving a pension based upon earnings that were covered by Social Security taxes will not have any kind of offset of their Social Security disability benefits.

However, there were, and are, some employers who did not buy into the Social Security system and, in these cases, no Social Security taxes were withheld from their employees’ earnings. Individuals who worked for employers who were not part of the system (but collected other tax on their employees' earnings) may still be eligible to receive a disability benefit--but it may be offset due to a pension based upon their non-covered work, i.e. earnings not taxed for Social Security.

There are some exceptions to this rule. For instance, if an individual has thirty years of covered earnings at a certain level, they may be excluded from an offset.

Some examples of employers who may not have taken out Social Security taxes might be state governments, federal government, some medical facilities, and school districts, just to name a few. If a person receives a pension from an employer who did not withhold Social Security taxes, they will have an offset of their Social Security disability or retirement benefit unless they meet one of the offset exclusions.

On the other hand, individuals who have military pensions, or pensions from employers who withheld Social Security taxes, can receive Social Security disabilityand their pensions with no offset. This means they can receive the full amount of their benefit from both their employer and Social Security if the employer has no offset provision for their pension.

Some employers try to offset the amount they have to pay an individual when the individual becomes entitled to other benefits. Most employers do not offset retirement pensions, but they may offset the amount they pay if an individual is receiving a pension based upon disability.